Senate report: Microsoft used loopholes to avoid billions in taxes
SEATTLE – A new congressional investigation claims Microsoft has been able to avoid paying $6.5-billion in taxes since 2009 thanks to the complicated tax structure in the U.S.
Today Sen. Carl Levin, Democrat of Michigan, released the findings from the Senate Permanent Subcommittee on Investigations report. The investigation reveals a number of tax loopholes allegedly used by Microsoft and other major U.S. companies to avoid paying billions in taxes. Specifically the report finds that among other things Microsoft used subsidiaries in Puerto Rico, Ireland, and Singapore, which are low or no tax jurisdictions.
“Major U.S. corporations are increasingly earning their profits here but shipping them overseas to avoid paying the taxes they owe,” said Sen. Carl Levin, D-Mich., the subcommittee chairman. “At a time when we face such difficult budget choices, and when American families are facing a tax increase and cuts in critical programs from education to health care to food inspections to national defense, these offshore schemes are unacceptable.”
The investigation also showed how Microsoft reportedly transferred the U.S. rights to intellectual property offshore.
“And then bought back a portion of those rights to make U.S. sales, a gimmick it used to avoid U.S. taxes on 47 percent of the revenue from Microsoft products developed and sold in the United States,” the report concluded.
Nothing Microsoft is alleged to have done in the report is illegal under the existing U.S. tax code.
Microsoft issued a statement in response today saying that it wants congress to reform tax law.
“Microsoft has a complex business and we must comply with the complicated tax code of the United States, resulting in an exceedingly complex tax structure,” said Microsoft in a statement cited by Geekwire.com. “That is why we’ve advocated for reforms to simplify the US tax code and make it more competitive with the rest of the world.”
Hewlett-Packard was also highlighted in the report for having reportedly used a tax loophole to avoid paying U.S. taxes on billions of dollars in offshore income that was then returned to the United States to run its domestic operation.
“Hewlett-Packard obtained the offshore cash by directing two of its offshore subsidiaries to provide serial, alternating loans to its U.S. operations. With the apparent support of its auditor, Ernst & Young, Hewlett-Packard characterized the ongoing lending as occasional short-term loans which are exempt from U.S. taxation under the tax code,” said a statement from Sen. Levin’s office.
Sen. Levin is highlighting Microsoft and HP as part of an on-going reform campaign aimed at U.S. tax law.
I fyou want them to pay teh taxes then fix the tax code... then tell me how much money you got instead of just building another level to a sinking tax ship! ... They said it themselves it is not illegal how they are doign it so make it illegal or fix the code end of story!
What was the point of this investigation? Basically, congress investigated companies doing nothing illegal and then complained that they didn't pay money that they were legally not obligated to pay. Talk about an abuse of political power to attack successful businesses in this country for no reason other to make some sort of populist attack the rich comments. If you don't want these companies to take advantage of legal tax "loopholes" then fix the tax code. I got a solution for you, make EVERYONE pay a simple flat tax or even better, scrap the federal income tax system and change it to a national consumption, aka sales, tax. Therefore everyone can control their tax rate base on what they consume. No deductions, no loopholes, and everyone has skin in the game!
 @UWGrad_96 Consumer tax is a fantastic idea.  But there's one problem.  Any unscrupulous business person will avoid collecting tax in order to attract business.
 @blessed There will always be people who will try to cheat taxes regardless of the system. You will always need an auditing and enforcement mechanism regardless of tax system. However, the simpler the taxing system, the harder it is to cheat it. The more complex the system (like we have now) the easier it is to hide and cheat.
First off, if it isn't illegal to do what they did, the stop the bitching!!
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Second off, it is the PRESIDENT and Department of Treasury's job to make sure businesses and individuals pay the PROPER amount of taxes (PROPER and EQUAL are not the same thing)
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Third off, all these "loopholes" were designed by ALL the other elected officials NOT just a Republican or Democrat based political system.
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Fourth, OUR GOVERNMENT DOESN'T NEED MORE OR NEW TAX REVENUE!!!!!!! OUR GOVERNMENT NEEDS TO STOP SPENDING ACROSS THE BOARD!!!!!!
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Besides, have you actually "HEARD" what the Democrats are saying about taxing the "wealthy"? It sounds more like they want a FLAT tax such as Romney/Microsoft/Exxon/Warren Buffett/YOU/ME etc should be pay the SAME percentage of income as everyone else, something the Republicans and the Tea Party have been trying to implement for over a decade!
 @RTNavy Just because it's legal doesn't mean it's ethical.
@IslandAtheist @RTNavy --- By whose definition? Do you feel it is also unethical for a "poor" single mom to take advantage of tax credits and loopholes that would refund to her all the taxes she paid and then some? That, too, is legal but may not be ethical. If the less fortunate can take advantage of ALL tax credits and loopholes afforded to them, then so can every wealthy person and corporation. You'd be better off working to fix the tax code so that ALL pay their fair share instead of moaning about the "rich" not paying their fair share, because those (both D and R) writing the code are part of the problem NOT the solution.
 @IslandAtheist Do you take advantage of all YOUR tax write offs? That is exactly what these "loop holes" are, write offs and accounting proceedures that are DESIGNED by the TAX CODE AUTHORS---Your Elected Officials.
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The tax code is way too complex to even attempt to place ethics on, let alone legality.
Thousands of Welfare Families Use Loopholes to Avoid Billions in Taxes - Lets go get those welfare families who cheat on their taxes by taking deductions the law allows.
Then fix the loopholes, make a flat tax across the board and no deductions. I don't mind paying taxes, it's a necessary evil but I NEVER take deductions. Take them away.
 @hologram5 Yea, right you don't take the "Standard Deduction"? Or the Spouse Deduction? Or the Dependent Child Deduction? Or the Sales Tax Deduction? Or the Property Tax Deduction? Or the Medical Expenses Deduction?
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The only way that any of those conditions could be true is that you don't make enough money to pay taxes OR you don't file a return at all!
Like millions of Americans, I file a Schedule A/B with my federal tax return. Â Those items are politely called "deductions." Â When a corporation does exactly the same thing, they're called the accursed "loopholes." Â I agree with kilroywashere. Â The tax code reflects the success of politicians/lobbyists representing special interest groups, with which all of us affiliate actively or passively. Â For starters, each state is a special interest group since we expect our congress people to head to DC and return to us some of the money we've sent there. Â Tax code reform was called for as early as 1952 and countless times since by my research. Â Since then, it's gotten worse not better, probably because the sword has to cut both ways. Â We want to stick it to businesses but keep the nice little give-backs we get and the issue gets buried again.
If Microsoft is taking advantage of the loopholes in the system, who's to blame? I say the government that set that $%#$! tax system up. You can't blame them for doing that if it's legal. There should just be a flat tax. Everyone would feel the pain equally, in fact, I'd bet that taxes would be less, because these billion dollar corporations would be paying more. I know absolutely nothing about the tax system however, so take that with a grain of salt.
Tax loopholes are there for the taking. Deductions on federal income taxes are there for the taking. They are all legal, and our government made them available to all taxpayers--the wealthy people, corporations, the middle-income people, and the poor people.
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Until the Internal Revenue Service huge income tax codes are changed, all of these entities will continue to take whatever and every single tax deduction and loophole they can find. In reality they would be foolish to not take every single deduction and loophole available.
I have worked in a few environments that have done business with Microsoft. (the service industry) And a HUGE majority of MS employees are absolute DB's. They are like children. I wouldn't cry if Microsoft went under and took their snotty employees with them. MS has made Bellevue and Redmond soulless, there is nothing unique or interesting about the whole east side.Â
Wow, so one sounds bitter.
 @msouthj Yeah, that is my personal experience with them over the years. I may sound bitter but that's how I have experienced interactions with them.
So what?  Really, so what?  Try this, every elected official should be prevented from using any outside help to fill out their own tax return.  MONEY MAGAZINE has a yearly (or had) a competition where they took a normal family tax return and every preparer they tested was  different.  Blame MICROSOFT?  Blame the IRS/  NO!  Blame congress that uses tax laws to legislate behavior and creative bookkeeping to hide tax increases.  But be careful as you will hurt a  whole industry if you made it simple.
 @bkburris How many have to file tax returns? Charlie Wrangel is a tax cheat and yet he never seems to be arrested. We have a tax cheat as secretary of the treasury.
 @bkburris Its funny people are complaining about Microsoft's tax practices. If people really wanted to expose Microsoft they would dig into the court cases where MSFT has been sued. When they settle or lose they insist that part of the settlement is to keep court records sealed. There are many reasons companies do this, some legitimate but the main reason is to cover up a pattern of abuse. This is where you will find Microsoft's skeletons, not their tax returns.
lmao there not paying tax???? nnoooo say it ant so microslop wouldnt do that . we gladly pick up there tab
What? Loopholes in the tax law? I'm shocked!
Nothing new... If you have the money, you can always hire tax experts to find loopholes. There are plenty of loopholes out there. Big coprorations and the rich exploit them all the time.
 @STK Wouldn't it be irresponsible of a tax professional to NOT seek the lowest tax liability that the law allows?
If they did not want people and companies to us these "loop holes" why did they write so many and make them so big???? What as a buisness onwer they think I went into buisness to pay taxes??? I went in to buisness to make money and evey dollar I do not pay in taxes is one I get to keep to run the buisness. I do not put in a 60+ hour week to keep other people rich, I am trying to make it to that 2% evil group.... Then I there is enough left over I will pay my "fair" share....
The article says Microsoft didn't do anything illegal, and the Tax Code didn't just make itself up , it was our idiot Gov. rep's., so why is this even an issue, for christs sake ?
 @DrAmerika Even worse, weren't those exceptions written with the intention of being used? Microsoft and others should be lauded for using those exemptions and following the suggestions of Congress.
Just like GE...thank God they are democrat supporters who believe in paying their "fair share"...we know the democrats will ensure a fair tax plan that will end these loopholes, right? Right? Right???Â
Oh wait, they've already had years to do that and haven't...oh, never mind...
 @takncarabizniz Are you advocating a FLAT tax on all people and corporations to make everything "FAIR"????
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Guess what, that is an idea many Republicans and even Current Tea Party activists have asked for for decades...
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That is the ONLY fair way to tax at ANY level...RIGHT?
 @takncarabizniz Whats even funnier is the liberals blame the republicans for the tax "loopholes" etc. but there are a lot of democrats that voted for those loopholes too. Pot meet kettle.
These companies are following the law. Maybe if the people writting the tax codes weren't so incompetent this sort of this wouldn't be allowed to go on.
 @Larrygg heh. And whenever do you think that any complicated tax code written by the crooks and fools in Washington DC cannot be successfully gamed?
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better a flat and low tax rate with no deductions for anything. And make everyone pay some money in income tax--no one should get off paying for our country. And certainly no one should get any money back in the form of an earned income credit.
Apple and Google were the worst offenders, yet KOMO choose to leave that out in their slanted version. If you canât tell the truth at least make it interesting.
 @DJ Smith Offenders. Seriously? No law was broken. What offense did they commit?
 @JCCBlvu  @DJ Smith There offense is they withheld money from the all knowing and perfect federal government that knows what to do with your money better than you do. They oppress American citizens by making people work for them instead of just giving money to the government so the government can give the money to the people. Microsoft made a bunch of money so it had to be done in some evil way as no once can obtain that much money without being crooked top to bottom therefore they are part of the 1% that must give up they money so the government can create more dependent people so they can be controlled. <sarcasm off>
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Seriously, its class warfare. Some people simply want the government to take money from the wealthy and give it to them.
 @LockesChild Well I aim to please :-)
 @SeattleJoe great job of channeling Occupy/Obama. Creepy, actually
 @DJ Smith Offenders? They are just following the law as written. If you don't like it then the offenders are the timeservers in Congress--the legislators who never, ever are thrown out of office.
Why is KOMO so against local businesses, here is the real article:
http://www.huffingtonpost.com/2012/09/20/microsoft-taxes-profits-offshore_n_1901398.html
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 @DJ Smith Yep, seems to be the "in" thing to do these days.
No wonder Bush enjoyed coming to dinner at Billy's house.
MS BAD...
Apple GOOD...
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Friggin hypocrites. In our own back yard no less...
@bobalouie then don't read this http://www.huffingtonpost.com/2012/09/20/microsoft-taxes-profits-offshore_n_1901398.html
 @bobalouie Agreed.  Not to mention their tactics to force hourly contract employees to work like they are salaried.  They say no overtime for contractors but if your work isn't finished you must stay or chance losing the job.  Some managers try to make up by giving the contractors cafeteria coupons for free meals which also circumvents paying SS and FICA on the overtime.  Microsoft is the most un-American company on our soil.  Not to mention how discriminatory some groups have become; made up of entirely one ethnic group.  Obvious, in-your-face discrimination.   I guess if you have lots of money you don't have to worry about America.  China and India love Microsoft and Romney.
Geeze Sen.Levin the light just came on for you, you think all those knocking on all yours doors and calling were selling cookies..
What a shock, I'm so surprised that the rich got richer.
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All of you "republicans" should be all for closing these loopholes right? Shouldn't everyone pay a fair share? And you "democrats" what have you done about the problem? NOTHING.I'm sick and tired of Americans acting like someone or something else. Make no mistake we are all in the world together and we will live and die by how we treat each other. I was raised to help my neighbor and furthermore my neighborhood, I also believe that our government is bloated and way to large. How am I in the minority?
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What will change? NOTHING.   If only we could elect Ron Paul....oh but we can't because the corrupt policies of both parties prevent him from really being on the ballot as a "real" candidate.
Loopholes, otherwise know as Tax Breaks are legal tax exemptions, rebates etc... written into the the tax code.
MS is only taking advantage of what is legally available to lessen their tax burden.
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Remember taxes are passed on to the consumer as a cost of doing business.
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The entire lobbying industrial complex is aimed at getting tax breaks for this that and the other "special interest".
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Vastly simplifying the tax code. Eliminating most if not all the breaks, credits, write offs and LOWERING the RATE would do more to revive the economy than anything else. Lower tax rates also have increased revenue to the gov't every time they been tried. A lower rate, means more economic activity, and as a result more revenue.
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As Sen. Levin if he'd support lower the rate.... even with a closing of the loopholes Levin is opposed.
 @JCM1776 Yup. As it is now, the ROI on lobbyists and tax accounting specialists is higher than for really top notch programmers. Change that, and we ALL win.
Letâs remember the loophole the next time you call a corporations call center and âBobâ who sound more like habib, asks if he can provide you with excellent service, sir? While these mega tax breaks make the blood in our veins boil, they are legal. Hereâs an idea; If the big corporation has a  a call center in the Philippines or some other god forsaken third world enclave, your corporation gets zero tax breaks.
And how is this different from any other large corporation--Exxon, GE, etc., or millionaire/billionaire types--Mitt Romney, Rush Limbaugh, etc? As long as our tax codes allow it, they will find a way to take deductions which decrease their taxes to next to nothing. Hey, if I had a horse that performed in the Olympics, I'd take the $77,000 deduction off my taxes, or a Lear jet, or five homes, or whatever. Its a shame we can't just simplify the tax codes and make everyone, including those corporations who are people too, pay a straight, across-the-board income tax, without any loopholes. But, that would be way too simple a solution to the increase in revenue we need to balance our country's budget, plus it would just be so unfair to people who work hard to be responsible, American citizens. (***sarcasm alert***)